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Approving a higher budget of $480 million and construction to begin "as soon as possible," leaders of El Camino Hospital pushed the long-delayed replacement hospital project one step closer to completion last week. They are already poised for the next step: settling the lawsuit brought by Saratoga lawyer Aaron Katz.

"We're taking on a debt load we've not had," board Vice Chairman Dave Reeder said last week. "We can do it, but it won't be easy. &#8230; If we can't get a settlement in the Katz suit, ... it's back to the drawing board."

Katz challenged the $148 million bond measure overwhelmingly approved by voters in 2003 to partially finance a new hospital that would meet upgraded state seismic code. The bidding process and the construction start date have been delayed for months while the lawsuit has made its way slowly through the courts. The hospital cannot issue the general obligation bonds until the case is decided or settled. Katz, who owns property in Mountain View, wants election laws changed so that taxpayer-supported bond measures are voted on only by those who own land in the pertinent voting district, regardless of where those landowners live.

Hospital leaders hinted last week that a settlement may be reached soon - but not soon enough to avoid the need for several years of economizing in other areas to compensate for the expensive delay in replacing the outdated main hospital building.

Hospital and district boards met in closed sessions about the lawsuit last week but took no action. However, interim CEO and longtime CFO Marla Gularte stated in open session that the hospital is negotiating a settlement with Katz. Katz had no comment at press time.

Jon Friedenberg, vice president for strategy and external relations, later described the prospect of settling a case the hospital considers to have no merit as "odious." Why would hospital administrators pursue the settlement they deplore? Construction costs are shooting skyward while the case plods along.

"There's what you'd like to do and then there's what you need to do," Friedenberg said.

In last Wednesday's meeting, Reeder said, "We're going to have to tighten the belt. We're going to have to do it more efficiently, (but) we don't want to reduce staff."

Friedenberg said that whatever form the belt-tightening takes, "It's a longer-term challenge - it won't happen this year. It will occur over the next several years to enable us to afford the debt service the project will require."

He said, "One strategy we'll take a look at is to make sure we're getting the maximum efficiency from our technology, so we have more patients getting their procedures done in a certain amount of time. That's one of the hundreds of things we'll be looking at."

The West Valley-Mission Community College District settled its share of the suit for $60,000 in early December. The remaining combined lawsuit against the hospital, the Mountain View-

Whisman Elementary School District and the Campbell Union High School District is in the Sixth District Court of Appeals.